Property: The answer may be blowing in the wind
READERS' LIVES; Investing in renewable energy ... state pensions ... personal allowances. Your queries answered
Sunday 03 August 1997
You may want to consider investing in the BayWind Energy Co-operative, which is currently issuing shares. The money raised will be used to buy wind turbines in Cumbria. The minimum investment is pounds 300 as a lump sum or pounds 10 under a savings plan option. Telephone 01229 821028 for details.
Another option is the Earth Saver account from Triodos Bank. Money deposited is lent out for renewable energy and energy conservation projects. The minimum deposit is pounds 10. Telephone 0171 973 9339 for information.
Other suitable investment opportunities do arise from time to time. One way to keep track of what's available is to subscribe to the newsletter of EIRIS, the Ethical Investment Research Service. A year's subscription for six issues costs pounds 12. For details, write to EIRIS, 504 Bondway Business Centre, 71 Bondway, London SW8 1SQ (or telephone 0171 735 1351).
In a recent pensions article, the Independent of Sunday said of Serps (the earnings related state pension) that many people will not receive the full benefit. This seems an alarming assertion. What does it mean?
The Serps pension - and whether governments of the 21st-century will be able to afford it - is a highly topical and contentious issue. Serps is likely to be scrapped by the Government once it has completed its root-and-branch review of pension provision. But whatever Labour may do to Serps in the future, even as things stand many people will not be entitled to a Serps pension, while others may have built up an entitlement in respect of only part of their working lives.
It is currently possible to build up entitlement to two distinct state- run pensions: the basic state pension and the additional pension, also called state earnings related pension, or Serps for short. Entitlement to both parts of the state pension depends on the national insurance contributions you pay, and on quite separate and different formulae.
The precise formula for working out a Serps pension is complicated. But an important characteristic of Serps is that, as its name implies, the pension you get will be related to your earnings while you are working - the more you earn (within limits), the higher your Serps pension.
It may come as something of a shock to some people to discover that, as such, they aren't building up any entitlement to Serps. Many employer- run pension schemes have contracted out (taken their members out) of Serps. Likewise, many employees have chosen to contract out of Serps through individual personal pensions. In each case the national insurance contributions that would otherwise have funded a Serps pension have been diverted to enhance the value of your occupational or personal pension. In many cases you will not lose out overall; nevertheless you should remember that you will not be due a Serps pension for the period you contract out.
Other groups of people are also not building up Serps entitlement, notably the self-employed and the unemployed. Their national insurance contributions (or credits) do build up entitlement to the basic state pension, but not to Serps.
It is not possible to contract out of the basic state pension. But it is possible to fail to build up entitlement to the full, flat-rate basic pension. This can happen if you don't pay the minimum level of national insurance contributions for a sufficient number of years during your working life - perhaps because you did not earn enough or because you paid no national insurance while a full-time student or while you were working abroad.
The upshot of all this is that many people won't get the state pension they may be assuming they'll get. And while the much maligned state pension alone is unlikely to be big enough to maintain the standard of living most would hope for, it can provide a key - and inflation-proofed - part of overall income in retirement. So any one who is planning their finances in retirement should make sure they have a clear idea of their likely state pension. You can get a forecast of your state pension from your local Benefits Agency, part of the Department of Social Security.
I'm a full-time housewife and my only taxable income is from income bonds and a building society account. This year it looks as if I shall have a surplus personal allowance of pounds 500 to pounds l,000. I have a taxable gain from my Halifax shares of over pounds 2,000, even after the capital gains tax allowance. Can I set this gain against my excess personal allowance? MG, Reading
No, the personal allowance of pounds 4,045 (for those under 65) in the current tax year can be used only to reduce your income tax bill, not your capital gains tax bill. While the first pounds 6,500 of chargeable gains are tax-free, anything over that amount is taxable.
The rate of capital gains tax is 20, 23 or 40 per cent, depending on what tax band(s) your taxable gains fall into when added to your income. The first pounds 4,100 of income is taxed at 20 per cent. In your case, you won't have used any of this band for income tax, since your income is less than your personal allowance. So taxable gains of up to pounds 4,100 will be taxed at 20 per cent.
Capital gains tax is charged for the tax year in which you dispose of an asset. You will have a capital gains tax bill only if you have disposed of your Halifax shares for more than pounds 6,500. If you still have the shares but want to cash them in, consider selling only pounds 6,500 worth now, thereby incurring no tax liability. You could then look to selling the remaining shares tax-free in a subsequent tax year.
Write to Steve Lodge, Personal Finance Editor, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL, and include a phone number. Alternatively, fax 0171-293 2096/2098 or e-mail: indybusiness@independent. co.UK. Do not enclose SAEs or any documents that you wish to be returned. We cannot give personal replies or guarantee to answer every letter. We accept no legal responsibility for any advice given.
Simon Read: "Pension freedom is months away but if we don't act soon, the freedom may be to make an expensive mistake with our future"
30 January 2015 11:00 PM
The introduction of the new pension freedoms has been "alarmingly chaotic", reckons Nigel Green, chief executive of the financial consultancy deVere Group, He said this week: "The implementation of changes appears to be being rushed in a cynical attempt to woo older voters ahead of May's election."
30 January 2015 09:24 AM
There has been continued criticism of banks' delaying tactics and failure to find those affected by by the UK’s biggest-ever financial mis-selling scandal
26 January 2015 03:29 PM
Companies will be required to ask about health and lifestyle choices or marital status, to protect consumers who do not take up the government’s offer of the Pension Wise guidance guarantee service
23 January 2015 08:00 PM
I had dinner with the pensions minister Steve Webb this week. There was a wide-ranging discussion about the new pensions freedoms starting in April, and changes to the state pension. Crucially, I also got to ask Mr Webb whether he had any plans to have another look at the injustice that is frozen pensions.
23 January 2015 08:00 PM
23 January 2015 08:00 PM
While the health of the economy is not insignificant, Mark Dampier finds it incredibly unpredictable in terms of its impact on the stock market
21 January 2015 12:32 PM
A new free app is aimed at the three-fifths of Brits who have never switched supplier
20 January 2015 09:34 AM
Regulator’s investigation into the market found that around £160bn was held in easy access savings accounts that pay interest lower or equal to BoE base rate
17 January 2015 12:00 AM
Simon Read: Information is power. And it's in the wrong hands when people are cold-called by companies that know they're in debt
17 January 2015 12:00 AM
In debt? You're likely to be targeted by unscrupulous companies that hope to profit from your misfortune. They may try to pretend to be your friend by offering what they call "help" – but almost certainly that help will come with a cost and leave you worse off than you were before they got in touch.
17 January 2015 12:00 AM
In less than three months' time radical changes to pensions will take effect, providing investors with more freedom. Yet for those who prefer to make their own investment decisions, the choice of funds available is overwhelming. And an income drawdown account is also not particularly easy to manage.
15 January 2015 12:23 PM
The minimum amount for which you can be forced into bankruptcy is being raised from £750 to £5,000
Derek Pain: I'm cautious, but remain one of the few bulls in the market
Donald MacInnes: Who would want to be a Barbie girl in a non-Barbie world?
Mark Dampier: How to get an income now that savings are past the 'use by' date
Thousands of UK investors could lose out following collapse of Secured Energy Bonds
Bargain Hunter: Fly off for a winter break in France or Portugal for well under £100
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